If you plan to withdraw your FD before it matures, whether partially or completely, this process involves paperwork and penalties. Before you go about the process of making a premature withdrawal of a fixed deposit, you must know what to expect.
When you have an unexpected financial or medical emergency, you can liquidate your FD in just a few steps. Read on to know more about the process.
Understanding Premature Withdrawal
After you have opted for a term deposit, commonly known as a fixed deposit, your money is invested for a fixed term. You get an interest based on how much you have invested and for how long. When you wish to proceed with a premature withdrawal of a fixed deposit, the timeline is reduced, which leads to an interest penalty. Some financial institutions may allow you to do this without any penalty, but this is rare.
Premature FD Closure Charges
The fixed deposit penalty will vary based on the bank or NBFC where you made the deposit. Before submitting the application for premature withdrawal of a fixed deposit, find out about the interest rate penalty. Here’s an overview of how much you may be paying:
Most banks charge a penalty ranging between 0.5% and 1.00% of the interest rate
The initially promised interest rate will also reduce based on the actual tenure
Some banks may forgo the penalty for prematurely withdrawing your FD
FD Premature Withdrawal Penalty
As FD promises to preserve your capital, your principal will be untouched. The penalty will be reflected in the FD interest earned over your investment period. So, assume you book an FD at ₹15 lakhs for 36 months at 7% p.a.
After 12 months, you wish to withdraw the funds, but the issuer charges a 0.50% penalty. In that case, your final interest will be calculated for one year at 6.50%. As such, here are your returns calculated before and after.
Parameters
Before Premature Withdrawal
After Premature Withdrawal
Tenure
36 months
12 months
Interest
7%
6.5%
Calculated Interest
₹34,716
₹9,990
Total Earnings
₹1,84,716
₹1,59,990
Avoiding Penalties on Withdrawing Prematurely
There are three options to avoid penalties for your premature withdrawal of a fixed deposit.
Option 1: Invest for a shorter period, like 7 days or 3 months
Option 2: Go for an issuer who doesn’t have penalties on FD premature withdrawal
Option 3: Choose flexi fixed deposit options
Advantages and Disadvantages of FD Premature Withdrawal
To make the right decision about your investment, check the table below:
Pros of FD Premature Withdrawal
Cons of FD Premature Withdrawal
1. You can get immediate access to funds 2. You can experience financial flexibility 3.You can pay off any debt with the FD proceeds
1. Your promised interest will be reduced 2. Your long-term goals may be impacted 3. You may have to bear interest penalties
If you want to withdraw your FD before the lock-in period, keep the penalty in mind. The best way to maintain your investment is to create an emergency fund that can help you address urgent needs with ease.
FAQs on FD Premature Withdrawal
Are there tax implications for early withdrawal of fixed deposits?
The application for premature withdrawal of fixed deposit does not affect the tax you need to pay. The tax is based on your interest earnings and is related to your tax slab. TDS is also applicable based on whether your interest earnings cross the threshold of ₹40,000 or ₹50,000 based on whether you are a regular or senior investor.
Can I avoid penalties for premature withdrawal of fixed deposits?
The only way to avoid penalties on FD premature withdrawals is when you choose a financial institution that doesn’t charge a fee for this facility. Otherwise, you can try to ladder FDs or choose a Flexi FD for more liquidity.
Can I reinvest my prematurely withdrawn fixed deposit amount in a new FD?
When you choose to proceed with a premature withdrawal of the fixed deposit amount, you can use the funds as you wish. You can also invest in a new FD with higher interest rates.
You book a fixed deposit, it is for a specific term. Generally, you close your FD after it matures at the end of this term. In case, you want to make a premature withdrawal, then you will have to give an FD closing application. Understanding the process can help you access funds when needed, so read on to learn the complete steps involved.
What is Fixed Deposit Maturity?
When you apply for a fixed deposit, you invest your money for a certain period. This can be anywhere between 7 days and 10 years. Based on your financial goal, you can choose a comfortable tenure. After the FD maturity period, you receive the invested principal amount back. If you have booked a cumulative FD, you also receive the interest earned. If not, you will get the payout at your chosen intervals.
How to Close an FD on Maturity
After your fixed deposit has matured, you can withdraw the funds and transfer the money to your savings account or renew your FD. There is also a third scenario when your fixed deposit has matured, and you have left it unattended. In that case, there are two possibilities:
The bank may transfer the funds to your savings account
The bank may renew your FD for the same tenure
If you want to withdraw your FD on maturity, follow these steps:
Step 1: Visit the financial institution
Step 2: Submit your FD receipt
Step 3: Ask to close the FD
Step 4: Complete the signing process
Step 5: Submit your bank details (as per your preference)
Step 6: Receive your money in your account
To withdraw the FD amount online, you can log into your net banking account and follow the process as mentioned on the dashboard. Most financial companies will automatically transfer the funds if you have not opted for auto-renewal.
What is Premature Fixed Deposit Withdrawal?
In case you want to make a withdrawal before the tenure ends, you can do so. Keep in mind that doing this can reduce your gains as you may not get the interest rate decided at the time of application. Premature withdrawal results in an interest penalty but helps you when you need to access funds for urgent needs.
Say you have invested ₹5 lakhs for 5 years, and there is a medical emergency in your family. In that case, you may want the ₹5 lakh corpus before the FD maturity period so you can deal with this crisis.
How to Close Your FD Before Maturity
In case of early withdrawal, you may have to pay FD closing charges based on your issuer’s policy and the investment terms. Here’s what the online and offline process involves:
The offline FD closing process goes like this:
Visit the financial company
Ask for an FD cancellation form
Fill out the form
Submit the required documents (if asked for)
Submit your form along with these documents
Receive your money in your account
In case you are following an online process, you can follow these basic guidelines:
Visit the website of the issuer
Log in using your login credentials
Select the prompt ‘Premature Close of FD’
Enter the details and submit your cancellation
You will receive the money after the approval of your FD closing application. The online process is usually much faster than the offline process. So, if you want your funds instantly, try to go for the online process. Make sure you have your fixed deposit receipt with you to access the number while closing your FD.
FAQs on Fixed Deposit Closure
Can I close my fixed deposit automatically upon maturity?
Yes, you can close your FD on maturity by ensuring you contact the issuer and transfer the amount to your savings account. You can close your FD before it matures as well.
Is it possible to close a fixed deposit prematurely instead of waiting for maturity?
Yes, it is possible to close your FD before it matures. Fill in the FD closing application, and it will be approved. In this case, the interest on your fixed deposit will not be the same as when you booked it since premature withdrawal comes with a penalty. Some banks may also require additional FD closing charges.
Can I close my fixed deposit online or do I need to visit the bank?
You can close your fixed deposit online, whether you are closing it before maturity or upon maturity. The online process may be much faster, but you can also close your FD offline by visiting a branch of the bank or NBFC yourself.
A fixed deposit account is the most common investment idea you will come across. It is a reliable tool that gives steady growth; all you need to know is how to open a fixed deposit account. With the growth of digital marketplaces, you have the option to choose between online and offline processes.
For most banks, the process of opening a fixed deposit account remains the same. This ensures that you can book an FD in just a few minutes to start earning interest without any delays. Knowing this process can help you plan out the easiest ways you can grow your money at minimal risk. Read on to learn all about it.
What is the FD account?
The definition of a fixed deposit states that it is a term deposit account with a fixed tenure. It is a type of investment you can avail of at any point. It doesn’t require you to meet any hard and fast eligibility criteria and offers you slow but stable growth.
On maturity, it will give you the invested amount with interest or you can access your payout at intervals and get the principal at the end of the tenure. There are certain features of FD which make this investment option reliable:
Assured returns
Flexible tenure
Security and stability
Investment ease
Tax benefits in certain cases
Loan against FDs
Capital preservation
How to Open a Fixed Deposit Account
Most banks give you the option to choose your preferred method of opening a fixed deposit account. After comparing interest rates, if you know which bank you want to invest in, this simplifies the task for you. Here are the steps you can follow.
Online Process
If you want to open a fixed deposit account online, you can follow a few simple steps and book a deposit in minutes. The following steps will help you complete the process in the comfort of your home without any hassles.
For existing customers:
Log in to your net banking account
Go to the ‘Transaction’ section
Choose the ‘Fixed Deposit’ option
Select your account branch
Enter your amount, tenure and appoint a nominee
Follow the instructions to complete the process
Download the fixed deposit receipt
You can also use a mobile banking app to open your fixed deposit account. Follow these steps:
Launch the app of your bank
Login using your credentials
Find ‘Open a Fixed Deposit Account’
Enter the amount you want to invest
Select a comfortable tenure
Choose the savings account from the amount that will be debited
Click on apply
Download the fixed deposit receipt
If you are not the bank’s existing customer, then you must follow these steps to open a fixed deposit account:
Go to the bank’s official website
Select the FD option
Fill out the application form
Select your preferred deposit terms
Make a deposit using online methods
Review and confirm the terms
Print and save the deposit details
Offline Process
In case you are comfortable booking your FD in person, banks have that option available too. Follow these steps to open a fixed deposit account offline at a financial institution’s branch:
Visit a branch
Ask for the FD application form
Fill out the form
Confirm the list of the self-attested documents required
Recheck your form and submit it with documents
Give the FD amount in cash or cheque
Receive your FD receipt on completion
Eligibility Criteria and Documents Required for Fixed Deposits
To open a fixed deposit account in India, the eligibility criteria are very straightforward. Here are the things you need to keep in mind while applying:
Mention your nationality
Mention your age, as senior citizens get higher interest rates
Submit documents, such as your Aadhaar, PAN, Voter’s ID or Driving license
Usually, FDs offer the best returns when you book them for special tenures offered by financial institutions. Withdrawing prematurely may result in loss of interest. So, if you require any additional funds during this period, consider applying for a loan. With the Fibe Instant Personal Loan, you get instant disbursal of up to ₹5 lakhs at competitive interest rates.
After approval, you can repay your loan over up to 36 months. However, if you want to become debt-free early and close your loan before the tenure ends, you can do that at no additional charge. All you need to do is download our Personal Loan App or log in on our website to get started.
FAQs on Opening a Fixed Deposit Account
What is the minimum and maximum amount to open a fixed deposit?
Most financial organisations mention the minimum FD amount ranging between ₹1,000 to ₹25,000. For most banks, there’s no maximum FD limit. However, the interest rate for selected tenure changes with the principal.
Can I open a fixed deposit jointly with someone else?
Yes, you can open a joint FD account with someone else. Usually, you can add up to three members for one fixed deposit account.
Is it necessary to have a savings account with the bank to open a fixed deposit?
The fixed deposit account opening process does not require you to have a savings account with the bank unless you are going for a sweep-in or Flexi FD. You can open an FD without being an
This guide explains what a lien on a fixed deposit means, how the lien marking process works step by step, its benefits and risks, and how it compares to a loan against FD. It also covers how to get your FD released once the lien is settled. Read time: about 6 minutes.
Fixed deposits are a popular scheme that helps you grow your savings. In addition to that, they also help you procure a loan during an emergency by acting as collateral. When you take a loan or a credit card against your FD, you should know about the lien on fixed deposit.
What Does Lien on FD Mean?
Fixed Deposits (FDs) are also a great way to secure funds in case of emergencies. When you pledge an FD as collateral, it becomes a liened FD, meaning you cannot withdraw it before repaying the loan. If you default on payments for a prolonged period, the lender has the legal right to recover dues from the FD amount.
In case you default on your repayment or credit card bills for a prolonged period, which varies depending on the lender, your FD will be seized. This is how a financial company gets access to dues.
Remember that a lien marking on a fixed deposit does not mean the issuer will break your FD and collect the money immediately. It simply refers to the fact that your FD is pledged against a credit facility. When you pay your outstanding dues, you will regain full access and ownership of your FD. However, if you are unable to do so, the financial institution has the legal right to collect the dues by accessing the lien amount on the fixed deposit.
What Does ‘FD is Lien Marked’ Mean?
‘Lien marked’ is the specific status your bank applies to an FD once it has been pledged as security. It is a flag placed in the bank’s core system against that particular FD account, and it typically shows up as ‘Lien Marked’ or ‘Under Lien’ on your FD receipt, passbook or net banking statement.
It does not change the ownership of the FD – you remain the account holder and continue to earn interest as usual
It blocks specific actions on that FD, such as premature withdrawal, closure or renewal, without the lender’s consent
The marking stays in place until the linked loan or credit facility is fully repaid, at which point the bank removes it
DID YOU KNOW?
You can usually check whether your FD is lien marked by looking at your FD statement or net banking dashboard, where the status field will explicitly say ‘Lien Marked’ against that deposit.
Benefits of Lien on FDs
Easy Access to Loans or Credit
A lien on a fixed deposit helps you leverage an FD to secure various credit facilities such as personal loans, credit cards or overdrafts. It is a convenient process that allows you to access funds by increasing your eligibility.
Lower Interest Rates
As you are pledging your FD as collateral, you may get a lower interest rate on your loan based on the policies of the financial institution.
Maintaining FD Benefits
When you access funds via a loan or a credit card, your FD continues to generate interest and grow at its own pace, since it is not broken or withdrawn.
Risks of Lien on FDs
Restrictions on Access to Funds
After a lien marking on a fixed deposit, you cannot withdraw the amount until you repay the loan. This makes it harder to access those funds in an emergency.
Potential Loss of Your FD
If you fail to repay your loan, the lender will recover the outstanding amount from your FD.
Impact on Credit Score
Any repayment failure on the loan or credit card backed by the lien will reduce your credit score, just like any other credit default.
How Does Lien on FD Work? (Step-by-Step Process)
Here is how the lien marking process typically plays out from start to finish:
You apply for a loan, overdraft or credit card and offer your FD as collateral
The lender verifies your FD details, including the remaining tenure and current value, to decide your eligible credit limit
The lender requests the FD-issuing bank to mark a lien on the deposit, and the bank updates its records to reflect the ‘Lien Marked’ status
Your FD continues to earn interest as usual, but it cannot be withdrawn, closed or renewed without the lender’s consent
You repay your EMIs or credit card dues as per the agreed schedule
Once you repay the loan in full, the lender sends a lien release request to the bank
The bank removes the lien marking, and your FD becomes freely accessible again
WATCH OUT
If you default instead of repaying, the lender can invoke the lien directly and recover the outstanding dues from the FD amount without needing your separate consent at that stage.
How to Remove Lien on Fixed Deposit: Steps to Get Your FD Released
The only way to free the lien amount on a fixed deposit is to repay your loan. Thus, you must stay on track with your repayments or credit card bills to get full access to your FD back.
Clear all outstanding dues on the loan or credit card linked to the lien
Request the lender to issue a lien release or no-objection confirmation to the FD-issuing bank
Confirm with your bank that the ‘Lien Marked’ status has been removed from your FD statement or net banking dashboard
Once removed, your FD is free to be withdrawn, renewed or closed as usual
Lien on FD vs Loan Against FD: Key Differences
A lien on FD is the mechanism used to secure a loan, while a loan against FD is a specific loan product that uses this mechanism. Here is how they differ:
Aspect
Lien on FD
Loan Against FD
What It Is
A hold placed on an FD when it is pledged as security for any credit facility
A dedicated loan or overdraft product built specifically around your FD as collateral
Where It Applies
Can back a personal loan, credit card, business loan or overdraft
Applies only to the specific loan or overdraft taken against the FD
Loan Amount
Depends on the credit facility it is securing
Usually up to 90-95% of the FD value
Interest Calculation
Depends on the underlying credit facility’s terms
Often charged only on the amount utilised, especially in an overdraft structure
Approval Speed
Depends on the credit facility applied for
Typically faster, since the FD itself is the primary security
Tips to Avoid Lien
Here are a few tips to avoid a lien on your fixed deposit:
Create an emergency fund and avoid using the FD as collateral where possible
Work on improving your credit score to qualify for credit cards or loans without needing an FD as security
Irrespective of how prepared you are, unexpected situations can put you in financial difficulty, which may lead to a lender claiming the lien. However, using your FD as collateral can help you access credit that you may not be able to get in any other way.
Not sure which option suits you? Explore Fibe’s Fixed Deposit and personal loan options to find the right fit for your needs.
FAQs On Lien on FD
1. How does a lien on a fixed deposit affect loan interest rates?
When you apply for a loan with your FD as collateral, you may get a lower interest rate, since the lender’s risk is reduced by having the FD as security.
2. Can I still renew my fixed deposit if there is a lien on it?
You cannot renew or withdraw your FD while a lien is applied on it.
3. Can a bank impose a lien on a fixed deposit without my consent?
A bank proceeds with lien marking on a fixed deposit only when you offer that FD as security for a loan or credit facility.
4. How long does a lien on an FD remain?
The lien remains in place until you fully repay the loan or credit facility it secures. If the FD matures before the loan is repaid, banks typically auto-renew it with the lien carried forward, rather than releasing the funds.
5. Can I partially withdraw a liened FD?
Generally, no. Most banks do not allow partial withdrawal from a liened FD unless the lender provides specific written consent, which is uncommon.
6. What happens to the interest earned on a liened FD?
The FD continues to earn interest as per its original terms even while the lien is active. You just cannot withdraw or close the FD itself until the lien is removed.
7. Does a lien on FD affect my CIBIL score?
Placing a lien itself does not affect your credit score. However, missing EMIs or credit card payments on the loan backed by the lien will impact your score, just as with any other credit default.
When considering direct vs regular mutual funds, remember that both allow you to invest in the same scheme. The key difference lies in how you invest. Direct plans let you invest directly with the fund house, often resulting in lower fees.
Regular plans, however, involve intermediaries like brokers or agents. That is why they usually have higher costs. Understanding these differences can help you make better investment choices and manage expenses more effectively.
Returns
When comparing direct vs regular mutual funds, the main difference lies in their cost structure, which directly impacts your returns. Here’s how the returns differ between the two types:
Direct Mutual Funds
These mutual funds may generally provide higher returns due to lower expense ratios.
For instance, if you buy a laptop directly from the manufacturer for ₹40,000, you pay only for the product. This way, you do not have to pay any added intermediary costs.
This is similar to direct mutual funds, where your entire investment is used for the fund’s growth. That results in higher potential returns due to lower fees.
Regular Mutual Funds
Because of the commissions paid to intermediaries, these mutual funds come with higher Total Expense Ratios (TER). That leads to lower NAV and, in turn, may lead to reduced returns.
For example, buying the same laptop through a distributor may cost you ₹45,000 due to the commission involved.
Similarly, with regular mutual funds, part of your investment is used to cover intermediary fees. That ultimately lowers the returns you may receive compared to direct options.
Benefits
Both direct and regular mutual funds offer unique benefits depending on your investment preferences. Here’s how the advantages pan out between the two:
Direct Mutual Funds
Regular Mutual Funds
Lower expense ratios help your investment grow more
You are in contact with brokers or financial advisors for guidance, helping you utilise their experience and insight
Lower fees lead to higher Net Asset Value (NAV), giving you better value per unit
Advisors recommend funds depending on your preferences
No intermediary fees lead to higher returns
Intermediaries monitor and adjust your investments regularly, ensuring your portfolio stays on track
Differences Between Direct and Regular Mutual Funds
When choosing between the two types of mutual funds, understanding their key differences is crucial. The table below highlights the differences between direct and regular mutual funds to help you make an informed decision.
Feature
Direct Mutual Funds
Regular Mutual Funds
Overview
Investment options offered directly by the Asset Management Company (AMC)
Investment options accessed through intermediaries such as brokers or financial advisors
How to Invest
Purchased directly through the fund’s website or the AMC’s platform
Purchased through intermediaries who may offer additional services and guidance
Cost Structure
Typically lower due to the absence of intermediary commissions or distribution fees
Higher expense ratio due to commissions paid to intermediaries
Investor Involvement
Investors make independent decisions and manage their own investments
Investors receive assistance and guidance from intermediaries for decision-making
Return Potential
Potentially higher returns due to lower expenses
Returns may be lower due to the additional fees involved
Access to Investment
Direct access to investments via the fund’s official website or at the fund house
Access via intermediaries who offer value-added services such as investment advice and portfolio management
Fees and Commissions
No commissions or fees for distribution
Commissions paid to brokers or advisors, which increase the expense ratio
Lower NAV due to higher costs associated with intermediaries
Example Expense Ratio
Around 0.25% – 0.75% of Assets Under Management (AUM) for fund expenses
Around 1% – 2% of AUM for fund expenses, including broker commissions
Common Mistakes to Avoid
Regardless of which type of mutual fund you go for, here are a few things you need to avoid:
Focusing only on past performance is a mistake since it doesn’t guarantee future returns
Not checking your portfolio regularly can leave you out of sync with your goals
Investing without a financial plan can lead to chasing trends instead of sticking to your goals
Not matching your investments to your goals could lead to disappointing results
Ignoring your risk tolerance means you might pick funds that aren’t right for you
Over-diversifying can spread your investments too thin and lower your returns
Putting too much in sectoral and thematic funds can be risky as sectors don’t always perform the same over time
Relying too much on mid-cap and small-cap funds can hurt you in a down market
Putting short-term money in equity can expose it to too much market volatility
Choosing between direct vs regular mutual funds depends on your investment style. Direct mutual funds are cost-effective, with lower expense ratios, making them ideal if you prefer managing your investments on your own. Regular mutual funds offer expert guidance, making them a great option if you need professional advice.
No matter which route you choose to go with, investing in mutual funds gives you a way to access funds when you need them. With the Fibe Loan Against Mutual Funds, you can get up to ₹10 lakhs by using your mutual funds as collateral without withdrawing from your investment. To get started, download the Fibe App and apply now.
FAQs About Direct and Regular Mutual Funds
Can I switch from regular mutual funds to direct mutual funds?
Yes, you can make this switch. Just be sure to follow the fund house’s process.
How does my choice between direct and regular mutual funds impact my investment returns?
Going for direct mutual funds usually means higher returns since there are no added fees that intermediaries charge. Regular mutual funds, on the other hand, tend to have higher costs because of the commissions to brokers or advisors, which can lower your returns. However, regular funds can enable you to get financial advice.
Is it easier to track the performance of direct mutual funds compared to regular ones?
Yes, it’s easier to track direct mutual funds as you manage them directly on the fund house’s platform. Regular mutual funds require updates from intermediaries, making tracking less direct.
How to identify direct and regular mutual funds?
To tell apart direct and regular mutual funds, check the following details:
Direct plans will have “Direct” or “Dir” in the name, while regular plans will show “Regular” or “Reg.”
Your Consolidated Account Statement (CAS) will show which plan you have
A regular plan will have an Advisor Registration Number (ARN) in the “Advisor” field
When it comes to investing in mutual funds, choosing between debt funds and equity funds is like taking two different paths. Equity mutual funds focus on investing in stocks, bonds and other securities. In contrast, debt funds primarily invest in debt instruments like government and corporate bonds.
By understanding how these two differ, you can invest smartly, keeping your future financial goals and risk appetite in mind.
What is an Equity Mutual Fund
An equity mutual fund is a type of fund that invests in stocks of listed companies and other equity-linked instruments. These are also called open-ended equity funds. These can be classified into the following:
Large-cap fund
Mid-cap
Small-cap
Micro-cap
Multi-cap funds
According to the Securities and Exchange Board of India (SEBI) rules, at least 65% of the fund’s assets must be invested in listed equities. The returns from these funds are primarily influenced by how well the stock market performs. In addition, factors like government policies and regulations also affect the returns.
Typically, equity funds focus on large or growing companies with a high market value, which is calculated by dividing the company’s total value by the number of shares it has.
What is a Debt Mutual Fund
A debt fund is a type of fund that invests in fixed-income securities such as:
Government bonds
Corporate bonds
Certificates of deposit (CDs)
Commercial papers
Debentures
These investments are less volatile than stocks, making them a good choice for risk-averse investors. According to the Income Tax Act of 1961, any fund that invests more than 65% of its assets in debt securities is a debt mutual fund. Here are some classifications of debt funds:
Overnight funds
Liquid funds
Ultra-short duration funds
Short duration funds
Medium duration funds
Long duration funds
Debt funds can invest in both listed and unlisted debt instruments to benefit from price increases, which are reflected in the fund’s net asset value (NAV). The performance of debt funds is mainly influenced by changes in interest rates.
Difference Between Debt and Equity Mutual Funds
The following table can help you compare equity vs debt funds, helping you choose a suitable type:
Basis of Difference
Debt Mutual Funds
Equity Mutual Funds
Meaning
Invest in fixed-income securities such as government securities, treasury bills, corporate bonds, commercial papers, and other money market instruments.
Invest in shares of companies traded on the stock market, generally offering higher returns compared to debt-based funds or term deposits.
Returns on Investment
Offers lower returns than debt funds in comparison, but they are more stable and predictable in nature.
Typically offer comparatively higher returns over the long term, driven by market growth.
Risks Involved
Suitable for investors with low to moderate risk tolerance, as these funds are more stable and less affected by market fluctuations.
Ideal for investors with moderate to high risk tolerance due to the chances of loss of capital during market volatility.
Investment Horizon
Suitable for both short-term and long-term investment goals, depending on the specific fund.
Best suited for long-term investment goals, typically 5 years or more.
Tax Savings
No tax-saving options are available as per the current taxation rules in India.
Tax-saving benefits are available by investing up to ₹1.5 lakhs per year under Section 80C of the Income Tax Act of 1961.
Which is Better: Equity or Debt Mutual Fund
Before comparing debt funds and equity funds or going ahead with one option, it’s essential to consider your investment goals, risk tolerance and the time frame for your investment. This will help you choose an ideal fund since there is no one-size-fits-all option when it comes to investing.
Equity funds tend to offer better returns compared to debt funds as long as you’re comfortable with taking higher risks. On the other hand, debt funds are a good choice if you prefer lower risk and are looking with stable growth.
Once you invest, allow your portfolio to grow without withdrawing too early. To get access to funds during this time, opt for the Fibe Loan Against Mutual Funds and get up to ₹10 lakhs by using your investment as collateral. You can get up to 80% of its value as a loan with an instant online application. Register on our website or download the Fibe App to apply now.
FAQs On Equity Vs Debt Funds
Which is preferable: a debt fund or an equity fund?
Deciding between debt and equity funds mainly depends on your financial goals and how much risk you’re willing to take. Debt funds are a good choice if you have a lower risk tolerance and aim for stable and moderate returns. Equity funds are better suited for those aiming for long-term growth and who can handle more volatility.
Are debt funds safer than equity funds?
Yes, debt funds are comparatively safer since they invest in less volatile instruments. This minimises the chance of loss of capital, making them ideal for investors with lower risk appetites.
Is it possible to invest in both equity and debt mutual funds simultaneously?
Yes, there is no restriction on adding debt funds and equity funds in your investment portfolio at the same time. However, consider various factors like your risk tolerance, goals, investment horizon and other factors to make an informed choice.
Have you ever heard of the term ‘flexi fixed deposit’? Fixed deposits have been popular amongst Indian investors because of their reliability and capital preservation. They give you the option to create a customised savings plan that helps you advance, slow and steady, towards your financial goals.
A flexi fixed deposit combines the benefits of a fixed deposit with a savings account. To learn more about it, continue reading.
What is Flexi Deposit?
Marrying the liquidity of a traditional savings account with the higher earnings of a fixed deposit, a flexi fixed deposit is an interesting option to consider. This hybrid product provides security and easy access to your funds.
With this type of FD, you can withdraw a part of your deposit, which is generally not allowed in FD investments where your funds are locked in for a predefined term. Here, your FD account is linked with your savings or current account. You can withdraw from it based on the terms of the financial institution. This facility comes at a cost as the interest rates you enjoy are lower than that of a regular FD. However, it does offer enhanced convenience.
It also allows you to choose a limit after which the funds in your account are transferred to the FD. When the account balance is lower than the limit you have set, the funds are transferred from the FD into the account. The terms of a flexi deposit may also differ as per the policies of the financial institution.
Features of Flexi Fixed Deposit
Here’s why you can choose this savings scheme:
Double Benefits
The attractive feature of a flexi deposit is you get the advantage of accessing funds via a bank account while earning interest that is higher than a traditional savings account. If you seek timely liquidity, this may be ideal for you.
Partially Withdrawable Funds
While you may not be able to access all of the funds of your FD, you can partially withdraw based on the allowed frequency and limit of the issuer.
Quarterly or Yearly Interest
Based on the financial institution’s policy, you can earn interest that is compounded at regular intervals. This is a great opportunity as you can save more and earn regular income.
Freedom of Choosing Principal and Tenure
You can decide on how much you want to invest in your FD and for how long. This helps you meet your financial goals on your terms.
Perks Like Loan Facility and Auto-Renewal
Just like a regular fixed deposit, a flexi deposit also allows you to pledge your FD to get a loan. You can also remain invested for the long-term by choosing the auto-renew facility.
Flexi Fixed Deposit Interest Rates
You can get assured returns with such an FD scheme, and most popular banks offer this option to grow your savings. Check the following table to compare the interest rates:
Name of Bank’s Scheme
Applied Interest Rate
Flexible Investment Tenure
Minimum Investment Amount
Axis Bank Auto Fixed Deposit
Up to 7.75% p.a.
6 months to 5 years
₹5,000
BOB Suvidha Flexible Fixed Deposit Scheme
Up to 7.65% p.a.
12 months to 5 years
₹5,000
e-SBI Flexi Deposit
Up to 7.50% p.a.
5 years to 7 years
₹5,000
DBS Bank Flexi Deposit
Up to 7.50% p.a.
374 days
₹10,000
RBL Bank Flexi Sure Fixed Deposit
Up to 8.85% p.a.
7 days to 10 years
₹5,000
Advantages and Disadvantages of Flexi Fixed Deposit
Keep the factors listed below in mind when deciding if this is the right investment for you:
Advantages of Flexi Fixed Deposit
Disadvantages of Flexi Fixed Deposit
Invest as much as you want Access higher liquidity Enjoy auto-renewal and loan facility
Lower interest rates than a regular FD Penalties apply for premature withdrawals May not be suited for long-term goals
Now that you know the basic facts, you can make the right decision based on your goals.
FAQs on Flexi Fixed Deposit
Can I withdraw money partially from a Flexi Fixed Deposit?
Yes, you can partially withdraw money from your fixed deposit with a flexi fixed deposit scheme.
What are the tax implications of investing in a Flexi Fixed Deposit?
Your yearly interest will be taxable as per your slab. TDS will also be deducted if your interest gains are about ₹40,000 or ₹50,000, based on whether you are a regular or senior citizen.
Can I link my savings account with a Flexi Fixed Deposit?
Yes, you can link your savings account or current account to your fixed deposit. This is the meaning of flexi fixed deposit.
Mutual funds are a great way to build long-term wealth and protect against inflation, which is why they’re a common choice in investment portfolios. When it comes to equity mutual funds, there are several types to consider, with multi-cap and flexi-cap funds being two popular options.
Read on to understand how they differ and how you can choose the one that best fits your financial goals.
What is a Multi-Cap Fund?
These are equity schemes that spread their investments across large-cap, mid-cap and small-cap companies, offering diversification. Note these features to better understand it:
According to a circular from the Securities and Exchange Board of India (SEBI), from September 2020, these funds must invest at least 25% in each market segment
A minimum of 75% of the fund’s total assets must be in equity or equity-related instruments
The remaining are allocated to safer investments like debt, cash or other securities
What is a Flexi-Cap Fund?
These are funds that invest in companies across different market sizes and sectors, offering higher flexibility to your portfolio. Here are its features:
These are open-ended equity funds
The fund manager makes the call on investment in different asset classes based on market conditions
At least 65% of the fund’s total assets are invested in equities
The remaining 35% can be allocated to other options like cash and debt, among others
Difference Between Multi-Cap and Flexi-Cap
Check out the following table to learn all about the features of flexi-cap vs multi-cap schemes:
Basis of Difference
Multi-Cap Funds
Flexi-Cap Funds
Meaning
These funds invest in large, mid and small-cap companies
These funds invest in companies of any market cap
Exposure to Equity
Minimum 75% of assets in equities
Minimum 65% of assets in equities
Market Cap Allocation
At least 25% allocation is done in large, mid and small-cap companies, according to the Securities and Exchange Board of India (SEBI)
No fixed allocation to market cap categories as they do not have any mandate
Risks
Higher risk due to exposure to a relatively diverse market cap
Moderate risk since these funds have a balanced exposure to various stocks
Management
Fund manager is free to select from any market cap
Fund manager selects stocks from specific market caps
Flexi-Cap Vs Multi-Cap: Which Is Better
The right option for you largely depends on why you’re planning to invest, meaning your investment goals. Your risk appetite is yet another crucial factor. Gaining insight into their main distinctions can assist you in fully understanding both choices. This way, you can make a more knowledgeable decision.
For higher risks in exchange for the possibility of greater rewards, multi-cap funds are a perfect choice. On average, approximately 5 to 7 years of commitment is required. This is due to the fact that they consist of a large percentage of mid-cap and small-cap stocks.
Alternatively, if you are concentrating on large-cap stocks, flexi-cap funds might be a more attractive choice. They also provide the option to invest in stocks of medium-sized and small-sized companies. If you want to invest for 5 years, this could be a suitable choice for you.
However, whether it is flexi-cap, multi-cap or any other type of mutual fund, you can use any of them to get a loan in just 10 minutes. With the Fibe Loan Against Mutual Funds, you can easily pledge these as collateral to get up to ₹10 lakhs without dissolving your investment. Apply now to get funds for any emergency with flexible repayment options by registering on our website or downloading our Fibe app.
FAQs on Flexi-Cap Vs Multi-Cap Funds
How do flexi-cap and multi-cap funds perform during market volatility?
Market volatility can significantly impact the performance of a fund. During uncertain times, flexi-cap funds’ flexible approach may offer an advantage. They tend to perform better in volatile markets by spreading investments across various market segments. On the other hand, multi-cap funds may not perform well.
Can I switch between flexi-cap and multi-cap funds easily?
Yes, you can switch between various types of mutual funds easily. You have the option to transfer units either partially or entirely from one mutual fund scheme to another, based on your investment needs.
Is a flexi-cap fund good for the long term?
Yes, flexi-cap funds are ideal for long-term investment goals. This is because they offer the flexibility to allocate assets across different market capitalisations, depending on market conditions and the fund manager’s strategy.
Are multi-cap and flexi-cap the same?
No, multi and flexi-cap funds are not the same. However, both are open-ended equity mutual funds that invest in stocks across various market capitalisations.
If you’re considering expanding your wealth through investments, consider comparing the features of ULIP vs mutual funds. These attractive options can help you build long-term wealth while offering tax-saving opportunities. While both can help grow your wealth, they differ significantly in structure and purpose.
Read on to explore these options to make an informed choice aligning with your financial goals.
What is a Unit Linked Insurance Plan (ULIP)?
These are insurance policies that also allow you to invest in the stock market. This way, they help you build returns over time. Here are some features to note:
Premium is paid monthly, quarterly or annually
Portion of the premium you pay goes towards a life insurance cover, while the remaining amount is invested in various funds
Allows choosing from different fund options such as equities, bonds or a mix of both
Comes with a lock-in period of 5 years
At maturity, you will receive the value of the accumulated units
What is a Mutual Fund?
It’s an investment option managed by professionals. Here, contributions from multiple investors are pooled together to make investments on their behalf. Here’s how they work:
These funds are then invested in a range of securities, such as bonds, stocks and money market instruments
You can invest in a lump sum or through a Systematic Investment Plan (SIP)
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds or other securities
Professional fund managers select and manage them based on your specific financial goals
You can choose from different types of mutual funds, such as equity funds, debt funds or hybrid funds
Your returns depend on how well the assets within the fund perform
No restriction of redemption, as most MFs don’t have a lock-in period
Difference Between ULIP and Mutual Fund
Refer to the following table to learn all about the characteristics of ULIP vs mutual funds:
Basis of Difference
ULIPs
Mutual Funds
Meaning
These are insurance products that combine investment and insurance benefits in a single plan
These are solely focused on investment, with no insurance component
Investment Purpose
These serve as both a market-based investment and an insurance product as a combination
These are investment tools aimed at wealth generation and achieving decent returns over time
Return on Investment
These invest in equities, debts or a mix of both, causing returns to vary
The returns vary depending on the selected scheme and are not guaranteed; they may offer higher returns compared to ULIPs
Lock-In Period
Have a lock-in period of 5 years, during which you cannot redeem your investments
Do not have a lock-in period, except for ELSS (which is 3 years)
Taxation
These premiums are eligible for tax deductions up to ₹1.5 lakh (under Section 80C) while the maturity amount is tax-free (under Section 10(10D))
Only tax deductions are available only for ELSS investments under Section 80C
Which is Better: Mutual Fund or ULIP
The ideal investment option for you depends on many factors. These are your goals, preferences and risk tolerance. For instance, a mutual fund could be the best option if you seek high liquidity and potential returns.
However, if you’re prioritising security and have a long-term financial objective, a ULIP may be more suitable, as they combine the benefits of insurance and investment.
While all things may work in your favour, you should understand that both these options come with a fixed locked-in period. Thus, you need alternatives to get instant funds for urgent financial needs. This is where Fibe Loan Against Mutual Funds can come in handy.
Get up to ₹10 lakhs in just minutes by pledging your mutual fund as collateral. Start by checking your eligibility, then submit your document and pledge your mutual fund with OTP. You can enjoy quick disbursal with flexible repayment options, so you don’t have to make any premature withdrawals. Apply now on our website or Fibe app to enjoy this additional perk of mutual funds.
FAQs on ULIP Vs Mutual Fund
Are ULIPs more suitable for long-term investments compared to mutual funds?
ULIPs are ideal for long-term investments if you appreciate the triple benefit of insurance, investment and tax advantages. On the other hand, if your main goal is to maximise investment returns without the need for insurance, mutual funds might be a better fit due to their flexibility and potential for higher returns over time.
What are the tax benefits of investing in ULIPs versus mutual funds?
ULIPs allow tax deductions on up to ₹1.5 lakh under Section 80C. Along with that, enjoy tax-free maturity proceeds under Section 10(10D).
ELSS mutual funds also offer tax deductions up to ₹1.5 lakh under Section 80C but gains are subject to capital gains tax upon redemption.
Which has lower charges and fees: ULIP or mutual funds?
The charges for mutual funds are typically much lower than those for ULIP schemes.
Can I switch between funds within a ULIP?
ULIP gives you the flexibility to switch between investment funds at any time during the policy term, enabling you to optimise your returns.
Should I invest in ULIPs or mutual funds for retirement planning?
Choosing between ULIPs and mutual funds for retirement planning depends on your priorities. ULIPs offer a combination of life insurance and investment, along with tax benefits. On the other hand, mutual funds focus solely on wealth creation.
When it comes to financial health, you know you can grow your wealth through smart investment options. While equity investments give you outstanding returns, they also expose you to a higher level of risk. This is where a money market fund can be a smart choice.
Being a type of secure Mutual Fund, its highlighting feature is its predictability. Ideally, for short-term investments up to 1 year, you can consider this option.
Read on to learn more about money market mutual funds if you plan to save for the near future while enjoying steady growth.
What Are Money Market Funds?
Sometimes, you may have some extra money which you don’t need right away. If you have money in physical form or your savings account, you may tend to spend it. Instead, try investing it until you need it in an option that offers high liquidity.
Let’s say there is a special kind of account in which you could start with excess funds and accumulate interest. It grows until the time you need the money. That is what exactly a money market fund does.
Financial institutions use money market funds to lend short loans. The fund is collected by pooling together many investor’s savings. In return, they give you a small interest amount. The amount is not very high compared to other funds but it’s best to invest in rather than let your savings remain idle.
Why are they Safe?
The loans from money market funds are given only to highly credible companies or the government, with the promise to pay back soon. As such, these loans have a very short tenure, so there’s less chance of something going wrong.
Here is a step-by-step process of how your invested funds are circulated in this investment scheme.
Pooling of the Money: Savings of many people looking for some interest on their money are pooled in a fund
Giving the Loan: The people in charge of this fund are called fund managers. They give this loan to trusted institutions such as government entities and credible companies
Collecting the Interest: The institutions that take the loan pay interest on the amount borrowed
Distributing the Earnings: The fund managers return the amount with a little extra from the earnings to all those who put their small savings in the fund
Some Types of Money Market Funds
A wide variety of these funds offer you the opportunity to invest as per your preference. Some common types are:
Government Funds: These are given as loans to governments and government entities and are considered to be a safer option
Certificate of Deposit: These are offered to corporations for the short term and give slightly better returns
Treasury Bills: These are directed towards the central government for short-term needs
Repurchase Agreements: These are market investments backed by the government that involve the sale of security at the promise to purchase them later
Money Market Funds: Benefits
Take note of these advantages to make an informed decision.
These are relatively safe options compared to the stock market
They are professionally managed, which is ideal for new investors as well as seasoned ones
Money market mutual funds are open-ended schemes that offer high liquidity
You can use it to diversify your portfolio to mitigate the risk of equity investment
You can invest extra money for a short tenure of up to 1 year
How to Invest in a Money Market Fund?
With these steps, you can start investing by choosing the best option.
Choose a Platform: Select a popular and well-known investment platform based on reviews and testimonials
Compare Some Funds: Look for money market funds from reliable companies and compare them carefully in terms of historical performance, fund managers and expense ratio
Invest Your Money: Put your money into the funds which you have shortlisted
Watch It Grow: Your money will start earning interest right away; interest is generally added to the investment value daily
Who Should Invest?
Money market funds are great if you want to keep your money safe but still earn interest. They are perfect for saving money that you may need soon, like for a big purchase, a vacation or an emergency fund. Under a guardian’s or parent’s guidance, minors can also invest in a money market fund. This gives them the ability to grow their savings.
Risks to Consider Before Investing
Fluctuations
Even though they’re safe, the value of your money in the fund might change over time. However, these changes are usually very small and won’t affect your savings much, especially if you’re saving for a short-term goal.
Impact of Inflation
The main risk is that the interest you earn may not keep up with inflation, which means your money may not grow as much.
By investing in such schemes, you can get high liquidity. Whether you choose these schemes or anything else, you can easily bridge financial gaps with the Fibe Loan Against Mutual Funds. With this option, you can get up to ₹10 lakhs quickly without liquidating your investment. Along with a simple online application process and minimum paperwork, you can continue enjoying the benefits of mutual funds returns. Apply now on the Fibe app or website to meet your financial needs.
FAQs on Money Market Mutual Funds
Do money market funds pay monthly?
The interest on the investment is added daily to the invested value and has a maturity of 1 year. However, these are open-ended funds that can be withdrawn at any time.
How to buy money market funds?
You can use any financial platform to invest in a money market fund.
Can a normal person invest in money market funds?
Any person, including minors under the age of 18, can invest in these funds.
